Question

A firm with a cost of capital of 7% is considering two projects (they are not mutually exclusive), one expected to return 9% and a second expected to return 9.5%. Which projects should it pursue

Answer 1

pursue both projects

Step-by-step explanation:

The projects are not mutually exclusive thus the choice of one project does not hold back the pursuant of another (can occur at the same time).

Projects which provide a return above their cost of capital must be pursued as they are less risky.

Both projects provide the return above the costs of capital and should be pursued.